Canada’s Inflation Rate Hits 4.7%, The Highest Level Since 2003
Canada’s inflation rate rose 4.7% in October from a year earlier, its highest level since February 2003 and far ahead of the Bank of Canada’s 2% target.
The October inflation rate, which comes after a 4.4% reading in September, is at the highest level in the three decades since the Bank of Canada began targeting inflation at 2% in 1991.
The 4.7% figure for October was in line with the expectations of economists. On a monthly basis, prices rose 0.7%, which was also on par with estimates. Last week, the U.S. reported inflation at 6.2% for October, which was above expectations.
Higher prices for energy, shelter and food led the gains in October consumer prices across Canada. Gasoline prices were a big contributor, up 5% in October and 42% from a year earlier. The global chip shortage continued to affect the production of automobiles, with prices for motor vehicles up 6.1% on the year.
October is the seventh consecutive month with inflation above 3%, which adds to growing concerns that price pressures are proving more persistent than had been expected. Inflation worries prompted the Bank of Canada last month to signal that it could start raising interest rates earlier than previously forecast.
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But for the Bank of Canada and other central banks, the worry is that tightening monetary policy too aggressively could harm the global economic recovery from the pandemic.
Markets expect that the Bank of Canada will raise its benchmark overnight interest rate to 1.5% over the next 12 months from 0.25% currently.
Canadian bonds rallied on the latest inflation data, reflecting relief that inflation didn’t exceed expectations as has been the case in the U.S. and elsewhere.